SATS – BT

SATS Q3 profit falls 25.4% on 32.3% higher revenue

Loss of $5.5m on sale of UK food business, JVs’ falling contribution cited

SATS Ltd reported a 25.4 per cent drop in net profit to $38.2 million for the third quarter, from $51.2 million a year earlier, due to rising costs, loss from the disposal of its UK-based food business, falling contribution from joint ventures & associates, and a weaker US dollar.

Revenue grew 32.3 per cent to $442.3 million, from $334.3 million. Earnings per share fell to 3.5 cents from 4.6 cents a year earlier.

During the quarter, SATS recognised a loss of $5.5 million on the disposal of UK-based Daniels.

Food solutions revenue rose 49.4 per cent to $285.3 million, due mainly to the consolidation of Tokyo Flight Kitchen (TFK) which contributed $82 million to its revenue. Excluding TFK, food solutions revenue improved 6.5 per cent, led by more airline meals served during the quarter. Excluding TFK’s expenditure of $80.5 million, group expenditure rose at a lower rate of 9.2 per cent to $318 million, attributed to higher staff, raw material and utilities costs.

In October 2011, SATS announced the disposal of Daniels Group (Daniels) in the UK. The loss on disposal of Daniels was $5.5 million. After adjusting for Daniels’ results and one-off M&A expenses for TFK acquisition incurred in Q3 FY11, SATS’ underlying net profit from continuing operations was $43.7 million.

A combination of weaker cargo volumes by associates (led by Hong Kong) saw SATS’ share of profits of associates and JVs fall 15.7 per cent to $12.9 million.

For the nine months ended December 2011, SATS posted net profit of $120.8 million, down 14.1 per cent from $140.7 million a year earlier. Revenue rose 31 per cent to $1.25 billion. Higher expenditure saw group operating profit drop 3.5 per cent or $4.4 million to $120.7 million. Underlying net profit from continuing operations, after adjusting for TFK and Daniels, dropped at a lower rate of 5.6 per cent to $129.9 million.

As at end-December 2011, SATS’ total assets stood at $2.13 billion, down 7.8 per cent from nine months earlier, while cash balance rose from $296.1 million to $421.3 million.

Equity attributable to shareholders was $1.47 billion, down 3.6 per cent from March 31 2011, due mainly to dividend payments of $188.4 million which were partially offset by profits recorded in the first nine months of the current year. Debt to equity ratio remained steady at 0.12 times.

During the third quarter, SATS saw the number of flights handled and unit services grow 13.3 per cent and 10.5 per cent respectively year-on-year, underpinned by the seasonally high travel season from October to December 2011. Gross meals increased by 4.1 per cent and unit meals by 3 per cent, in line with the higher passenger traffic recorded during the quarter, while cargo throughput went up slightly by 1.6 per cent.

The company is cautious about the final quarter citing the seasonally low travel period between January and March.

It does not expect its Singapore International Cruise Terminal (ICT) venture, where it has a 60 per cent stake in a partnership – with Creuers Cruise Services holding the remaining share – to be profitable in its first year after operations start. The company, which invested $3.6 million in the venture, pointed out that most cruise operators plan their itineraries more than a year in advance. But it remains confident that, given its ability to take larger ships, the ICT will prove to be a profitable venture in the medium to longer term.

SATS shares closed trading yesterday at $2.39, up four cents.

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